May 13 (Bloomberg) -- The Obama administration proposed
cybersecurity legislation aimed at protecting banks, power
plants and government computers from hackers.

The administration wants tighter oversight of critical
infrastructure and also proposed requiring companies to notify
consumers of data breaches. The Homeland Security Department
would “work with industry” to detect vulnerabilities in
electrical grids and financial networks, according to a summary
of the proposal released yesterday by the White House. The plan
also calls for mandatory minimum penalties for computer-related
crimes.

The administration’s proposal seeks to jump-start efforts
in Congress to update U.S. laws in response to the increased
threat of cyber attacks capable of crippling business and
government operations.

“Cyber crime has increased dramatically over the last
decade,” according to the summary. “It has become clear that
our nation cannot fully defend against these threats unless
certain parts of cybersecurity law are updated.”

U.S. lawmakers introduced about 50 cybersecurity measures
in the last session of Congress, according to the White House
summary. Those measures include at least eight bills that seek
to boost security at energy and utility companies.

Senate Majority Leader Harry Reid, who is compiling
comprehensive cybersecurity legislation on his side of Capitol
Hill, solicited the administration’s proposal to guide
Congress’s efforts on the issue.

The White House proposal would require companies that
operate systems critical to the nation’s economy to develop
plans for securing their systems. They also would have to hire
commercial auditors to determine if the security procedures are
adequate. If not, the company would have the option to work with
the Homeland Security Department to strengthen the plan.

A “major concern for companies” is that the government
may choose to disclose the audits publicly, which “could turn
into a naming and shaming approach,” Travis Sharp, research
associate at the Center for a New American Security, a
Washington-based policy research group, said in an interview.

Copyright

‘Rogue’ Websites Selling Pirated Goods Targeted by U.S. Bill

The bill targets websites “dedicated to infringing
activities” including the sale of illegally copied music,
movies, pharmaceuticals and consumer products.

The measure would, among other things, allow the U.S.
attorney general to serve a court order on U.S.-based search
engines, Internet-service providers, payment processors and
online advertising networks requiring them to prevent access to
an infringing site or stop doing business with such a site.

“This legislation will protect the investment American
companies make in developing brands and creating content, and
will protect the jobs associated with those investments,”
Senator Patrick Leahy, a Vermont Democrat, said in a statement.

Leahy, chairman of the Senate Judiciary Committee,
introduced the bill with two Republicans, Orrin Hatch of Utah
and Chuck Grassley of Iowa. It is co-sponsored by seven other
members of the committee. Leahy introduced similar legislation
that failed to advance in the last session of Congress.

The Business Software Alliance, which represents Apple
Inc., Microsoft Corp. and other technology companies, and the
Software & Information Industry Association, whose members
include Google Inc. and International Business Machines Corp.,
praised the legislation.

Warner Music, Sony Reach $105 Million Agreement With Lime Wire

Warner Music Group Corp. and Sony Corp., along with other
music labels, agreed during a trial to settle their copyright
lawsuit against Lime Wire LLC and its founder, Mark Gorton, for
$105 million.

“The case has just settled,” U.S. District Judge Kimba
Wood told jurors yesterday.

Lawyers for both sides met throughout the day at the
Manhattan courthouse. The defendants will pay a total of $105
million, according to e-mailed statements from the Recording
Industry Association of America and Willkie Farr & Gallagher
LLP, the law firm representing Lime Wire and Gorton.

During the trial, the music-label owners, which also
included Vivendi SA’s Universal Music Group and Citigroup Inc.’s
EMI Group, sought more than $1 billion. The labels claimed Lime
Wire and Gorton induced the infringement of copyrights on
thousands of songs through peer-to-peer file-sharing software on
the Internet. Wood ordered Lime Wire to shut down its music
service last year.

Glenn Pomerantz, a lawyer for the music companies, told the
jury of eight women and one man in opening statements on May 3
that the record industry’s revenue fell 52 percent from 2000,
the year Lime Wire was founded, to 2010.

“We are pleased to have reached a large monetary
settlement,” the recording association said in its statement.
“Designing and operating services to profit from the theft of
the world’s greatest music comes with a stiff price.”

Gorton’s lawyers were trying to convince the jury that
other factors were responsible for the decline in industry
revenue besides peer-to-peer, or P2P, file-sharing.

Gorton, 44, declined to comment about the settlement.
Besides founding Lime Wire, he operated a New York-based hedge
fund, Tower Research Capital LLC.

The case is Arista Records LLC v. Lime Wire LLC, 06-05936,
U.S. District Court, Southern District of New York (Manhattan).

Yao Ming has a sportswear contract with Reebok
International Ltd., the official Chinese news service said.

Baidu Files Appeal Against China Ruling in Favor of Shanda

Baidu Inc. filed an appeal against a ruling by a Shanghai
court in favor of Shanda Interactive Entertainment Ltd., Kaiser
Kuo, a Baidu spokesman, said by phone yesterday.

Baidu was ordered to pay Shanda damages of 500,000 yuan in
the May 10 ruling in the copyright-infringement case, Elyse
Liao, a manager at Shanda’s investor relations department said
yesterday. Both Kuo and Liao declined to comment further on the
dispute, centered on electronic book products.

Patent

Apple Loses Decision in Patent Case Against Kodak Before ITC

Judge Robert Rogers in Washington said yesterday that
neither of the two patents in Apple’s case before the ITC were
being infringed. The judge also held that one of the patents is
invalid.

The judge’s findings are subject to review by the six-member ITC, which has the power to block imports of products
that infringe U.S. patents.

Apple, maker of the iPhone and iPad tablet computer, filed
its case in April 2010, about three months after Rochester, New
York-based Kodak accused Apple and BlackBerry maker Research In
Motion Ltd. of infringing a patent related to ways of previewing
images. The ITC in March said it would review a judge’s findings
in that case, which went in favor of Apple and RIM.

Kodak filed its initial complaint to force Cupertino,
California-based Apple and Waterloo, Ontario-based RIM to pay
patent royalties. Kodak Chief Executive Officer Antonio Perez
has said a victory in the dispute may generate as much as $1
billion in new licensing revenue.

The case is In the Matter of Digital Imaging Devices and
Related Software, 337-717, U.S. International Trade Commission
(Washington).

For more patent news, click here.

Trademark

ZTE Says Huawei ‘Roadblocks’ Won’t Keep It Out of Europe

ZTE Corp., China’s second-largest maker of phone network
equipment, said “roadblocks” from rival Huawei Technologies
Co. won’t keep it out of Europe after Huawei won a preliminary
injunction for alleged trademark infringement.

The May 2 injunction from a German court is only a
“temporary relief” and doesn’t constitute a ruling on whether
ZTE actually infringed, ZTE said in an e-mailed statement. The
court prohibited ZTE from using a mark on USB modem sticks or
selling USB sticks that have a certain legally protected design,
according to a copy of the judgment obtained by Bloomberg News.

ZTE and Huawei, both based in Shenzhen, China, are looking
to expand sales in Europe. Huawei last month filed lawsuits in
Germany, France and Hungary accusing ZTE of patent and trademark
infringements related to data-card and high-speed mobile
Internet technology.

ZTE said April 29 it filed its own lawsuit in China
claiming Huawei infringed patents for fourth-generation mobile
network technology.

Huawei is “committed to the protection of its own
innovations,” Ross Gan, a spokesman, said yesterday. “We
welcome the court’s decision to issue an injunction in favor of
Huawei that prevents ZTE from continuing to infringe our
trademark and patent rights.”

For more trademark news, click here.

Privacy

Disney Unit to Pay Record $3 Million to Settle FTC Charges

Walt Disney Co.’s Playdom online game unit agreed to pay $3
million to settle Federal Trade Commission charges of disclosing
personal information about children without their parents’ prior
consent.

The settlement is the largest civil penalty ever for
violating the Children’s Online Privacy Protection Rule, the FTC
said yesterday in a statement on its website.

Disney, based in Burbank, California, acquired Playdom in
August.

Sienna Miller’s News of the World Lawsuit Abusive, Lawyer Says

Actress Sienna Miller’s lawsuit against Rupert Murdoch’s
News of the World newspaper must be dismissed as abusive, a
lawyer for the newspaper told a London judge.

The actress was offered 100,000 pounds ($163,000) by News
Corp.’s U.K. unit to settle the suit over allegations that
journalists at the newspaper hacked her mobile phone.

The sum is far more than she could hope to receive if the
case goes to trial, Michael Silverleaf, the newspaper’s lawyer,
told judge Geoffrey Vos at a hearing yesterday. The paper
admitted liability for the wrongdoing Miller claims and offered
her money, so there is nothing left for the court to decide,
Silverleaf said. The case should continue only if Miller’s
lawyers can show she’s entitled to more than 100,000 pounds, an
amount he said U.K. courts award only for serious injuries.

Miller, 29, is one of more than 20 celebrities and
politicians suing New York-based News Corp. over the more than
four-year-old phone-hacking scandal. The company apologized and
offered to settle some of the cases last month after two
journalists linked to the paper were arrested.

Silverleaf rejected suggestion by Miller’s lawyers in court
documents that she might be entitled to as much as 400,000
pounds. Former Formula 1 president Max Mosley won a record
60,000 pounds in damages from the News of the World in 2009 over
a story claiming he engaged in a Nazi-themed sex party. Mosley
has said the party had no Nazi overtones.

Miller’s lawyer, Hugh Tomlinson, said that it was “nice to
hear the News of the World admitting how bad the damage they did
to Mr. Mosley was.”